Match Corporation Limited v Choolwe & Another (Appeal 75 of 2005) [2003] ZMSC 11 (31 October 2003)

IN THE SUPREME COURT FOR ZAMBIA Appeal No. 75/2002 HOLDEN AT LUSAKA (Civil Jurisdiction) BETWEEN: MATCH CORPORATION LIMITED (cid:9) Appellant and EDWARD CHOOLWE (cid:9) 1St Respondent KHALID MOHAMMED (cid:9) 2nd Respondent CORAM: Lewanika DCJ, Mambilima and Chitengi, JJS on 6th August, 2002 and 31st October, 2003. For the Appellant (cid:9) Mr. A. J. Shonga of Messrs Shamwana &Company For the 1st Respondent: N/A For the 2nd Respondent: Mr. M. N. Ndhlovu of Messrs Chifumu Banda &Associates JUDGMENT Chitengi, JS delivered the Judgment of the court. Authorities referred to: - Chitty on Contracts 22nd Edition Volume 1 Paragraph 31. Halsbury's Laws of England 4th Edition Volume 9 Paragraphs 314 and 320. Jane Mwenya and Jason Randee SCZ Judgment No. 4 of 1998 (unreported). Key and Elphistones Precedents in Conveyancing 14th Edition Volume 3 at Page 193 J2 Halbury's Laws of England 4th Edition Volume 27 Paragraph 255. Statute of Frauds 1677 Section 4. (77 Chitty on Contracts 26th Edition Volume 1 at Paragraph 172. In this appeal we shall refer to the Appellant as the Plaintiff, the first Respondent as the Defendant and the second Respondent as the Third Party, which is what they were in the court below. The facts of this case can be briefly stated. The relationship between the Plaintiff and the Defendant did not start with the sale agreement, the subject of this appeal. The relationship between the Plaintiff and the Defendant started in 1989 when the Plaintiff and the Defendant entered into a lease agreement whereby the Defendant leased to the Plaintiff the property known as Plot 105 of Farm 284a Great East Road Lusaka, a residential house and hereinafter referred to as the property. In August 1990 the Defendant, who appears to have been impecunious at that time, advertised the property for sale. However, on 23rd August 1990 the Defendant wrote a letter to the Plaintiff saying he had decided to sell the property and that he was giving the Plaintiff the first option before he could offer the property to the general public for sale. At the time the Defendant urgently needed money to purchase a farmhouse in Makeni, inject money in his business and pay two months loan repayment arrears on a loan he had with the bank. The Defendant immediately needed K20,000.00 which he said would be deducted from the purchase price of the property, if the Plaintiff decided to purchase the property, or he would repay together with the rent paid to him by the Plaintiff in advance, if the Plaintiff decided not to purchase the property. J3 On the 29th August, 1990, according to a document produced in the court below, the Defendant asked to be paid K1.5 Million. The K1.5 Million was not paid to the Defendant by the Plaintiff. Eight days later, on 6th September, 1990, the Plaintiff and the Defendant executed an agreement where it was agreed that the Defendant would sell the property to the Plaintiff at the consideration of K2,370,000.00. In this agreement the Plaintiff and the Defendant agreed, inter alia, that the consideration, less the amounts paid to the Defendant by the Plaintiff as rent in advance, would be paid to the Defendant immediately the property had been transferred to the Plaintiff. In all, the Defendant was advanced K790,000.00 by the Plaintiff and, according to the agreement, the K790,000.00 was to be deducted from the purchase price. On 12th September, 1990 the Defendant wrote to the Plaintiff rescinding the agreement to sell the property, an action which the Plaintiff rejected and which later galvanized the Plaintiff into placing a caveat on the property. The third party who saw the advertisement which the Defendant had placed in the press in August 1990 responded to the advertisement and agreed to purchase the property at K3,000,000.00. According to the Third Party, before the transaction could be concluded, he went with the Plaintiff to a lawyer who conducted a search on the property and found that the property was not encumbered. This was after the Third Party and the Defendant had gone to see the property. At the property the Third Party and the Defendant found a security guard. The Third Party only peeped into the property through the window. After the lawyer said that the property was not encumbered the Third Party and the Defendant J4 then executed the Law Association of Zambia contract of sale and the Third Party paid the Defendant the purchase of price of K3,000,000. On the understanding that he would purchase the property the Plaintiff made improvements to the property. At the end of December, 1990 problem started. The lease between the Plaintiff and the Defendant in respect of the property expired and the Third Party went to the Lands and Deeds Registry to register the property in his name, only to discover that the Plaintiff had placed a caveat on the property. The Third Party joined these proceedings to get vacant possession of the property which he subsequently got and is now in possession. On these facts the Plaintiff brought an action in the High Court seeking specific performance of the contract referred to above and damages for breach of the same contract. The High Court dismissed the Plaintiffs action holding that there was no binding contract between the Plaintiff and the Defendant because there was no consideration and formality required for a land transaction. According to the learned trial Judge, the relationship between the Plaintiff and the Defendant only amounted to an intention to create a legal relationship. The Plaintiff now appeals to this court against the judgment of the High Court. When we heard the appeal only the Plaintiff and the Third Party were present. The Defendant, for unexplained reasons did not attend or file J5 written heads of argument. We, therefore, proceeded to hear the appeal in his absence. Mr. Shonga filed heads of argument based on four grounds of appeal and also made oral submissions. The first ground of appeal was that the learned trial Judge erred in law and fact by holding that there was no concluded contract between the Plaintiff and the Defendant. The second ground of appeal was that the learned trial Judge erred in law by failing to award specific performance of the contract of sale to the Plaintiff. The third ground of appeal was that the learned trial Judge misdirected himself by holding that the Third Party had acquired good title to the house in issue. The fourth ground of appeal was that the learned trial Judge erred in law by awarding mesne profits to the Third Party. When arguing the appeal Mr. Shonga argued grounds one and two together and grounds three and four separately. On ground one and two Mr. Shonga submitted that the learned trial Judge erred in law and fact when he found that there was no concluded contract between the Plaintiff and the Defendant because there was no consideration while in the contract of sale between the Defendant and the Third Party there was consideration. Mr. Shonga submitted that the learned trial Judge having held that there was an intention between the Plaintiff and the Defendant to create a legal relationship and there being J6 no cross appeal on this holding by the learned trial Judge, which in fact stands at the heart of the several conditions required for a valid contract, it should be taken to mean that this holding is not contested. With respect to consideration, Mr. Shonga submitted that the advance rent payment amounted to consideration. He conceded that the money was paid prior to the execution of the sale agreement but argued that that did not mean that it was past consideration. The advance payment was not initially paid for the purchase of the property but for rent. It was Mr. Shonga's submission that according to the agreement of sale the Plaintiff and the Defendant themselves treated the advance rental payments as consideration for the past and current agreement. There was no dispute that the amounts were paid and that the amounts paid in advance formed part of the purchase price. Alternatively, Mr. Shonga, submitted and argued, if the court finds that there is no executed consideration then there is evidence of executory consideration. On executory consideration, Mr. Shonga referred us to Chitty on Contracts Paragraph 31(P and Halsburys Laws of England Paragraph 314(2) which defined executory consideration as: - "Consideration is said to be executory when it consists of a promise to do or forbear from doing some act in the future." It was Mr. Shonga's submission that executory consideration is good consideration. He argued that promises were made between the Plaintiff and the Defendant to sell the property and to take all the steps to assign to the Plaintiff and the Plaintiff to buy. J7 On ground three, Mr. Shonga submitted that the contract between the Plaintiff and the Defendant preceeded the contract between the Defendant and the third Party. Therefore, the Third Party could not acquire good title to the property. It was Mr. Shonga's submission that the Third Party had both constructive and actual notice of the Plaintiffs interest in the property. Mr. Shonga observed that the Third Party said the Plaintiffs lease would expire in December 1990 indicating that the Third Party knew that the Plaintiff was still in occupation. Despite this, Mr. Shonga pointed out, the Third Party did not care to investigate the interests of the Plaintiff in the property. Mr. Shonga then referred us to a number of cases where we have said that a tenant's occupation of land is notice of all the tenant's rights and that it is incumbent upon the purchaser to find out from the tenant what his rights are and that if the purchaser does not investigate then whatever title he acquires will be subject to the title or rights of the tenant in possession. We only cite the case of Jane Mwenya and Jason Raudee Vs Paul Kapinga(3). In conclusion on this ground, Mr. Shonga submitted that because the Third Party failed to investigate the Plaintiff's rights, any title the Third Party acquired was subject to the rights of the Plaintiff. On ground four Mr. Shonga submitted that Third Party was not entitled to mesne profits because the title to the property had not passed to the Third Party and the Third Party did not, therefore, qualify as a Landlord. The Plaintiff had placed a caveat on the property. It was Mr. Shonga's submission that until transfer is registered the title of the transferee is incomplete and the transferor is deemed to be the proprietor. As authority for this proposition, Mr. Shonga cited Key and J8 Elphinstones Precedents in Conveyancing at Page 193(4). In any case, Mr. Shonga submitted and argued, only a tenant who continues in occupation after the expiration of the lease will be liable to the landlord to pay mesne profits. In support of this principle, Mr. Shonga cited Halsbury's Laws of England 4th Edition Volume 27 Paragraph 255(6). Mr. Shonga concluded by saying that the Third Party was not entitled to mesne profits and, therefore, the award for mesne profits was a misdirection. Mr. Ndhlovu learned counsel for the Third Party filed heads of argument in response. He did not make oral submissions. He only relied on the heads of argument. In ground one Mr. Ndhlovu submitted that there was no agreement between the Plaintiff and the Defendant. The Defendant needed K1.5 Million to purchase a house in Makeni e.t.c. but the Plaintiff counter offered K790,000 as set off against the purchase price of the property. The Defendant signed the agreement on the understanding that he would be given K1.5 Million immediately. The Defendant rescinded the contract six days later when the Plaintiff failed to pay the K1.5 Million. It was Mr. Ndhlovu's submission that the agreement of sale between the Plaintiff and the Defendant did not satisfy Section 4 of the Statute of Frauds 1677(6) which requires, inter alia, that the Memorandum should state that consideration has moved from the purchaser to the vendor. The advance rentals were past consideration. (cid:9) Further, Mr. Ndhlovu submitted that under Section 27(16) of the Bill of Exchange Act 1882(7/ a debt or liability can not constitute valuable consideration. About the wording of the agreement between the Plaintiff and the Defendant on one hand and the one between the Defendant and the J9 Third Party on the other hand, Mr. Ndhlovu submitted that the earlier one was futuristic while the subsequent one was conclusive. We must deal with this submission straight away. All we can say about this submission is that it is startling. We cannot decide an appeal on semantics. With respect to ground two Mr. Ndhlovu submitted that specific performance can only be ordered where there is a legally binding contract of sale and where damages would be difficult to quantify. In this case there was no legally binding contract. It was Mr. Ndhlovu's submission that the Plaintiff can only be refunded his money but without interest as the Plaintiff refused to accept the refund. On ground three Mr. Ndhlovu submitted that as there was a legally binding contract between the Defendant and the Third Party, the Third Party acquired good title to property. When arguing ground four Mr. Ndhlovu first defined mesne profits and then submitted the Third Party is entitled to mesne profit because the Plaintiff occupied the property without paying rent to the Third Party. We have considered the evidence that was before the learned trial Judge, the submissions of counsel and the authorities they have cited to us and we have looked at the Judgment of the learned trial Judge. On the evidence we are bound to say that the determination of this appeal turns on the question whether the sale agreement executed between the Plaintiff and the Defendant was binding and legally enforceable. If this sale agreement was legally enforceable, then the issue whether or not the agreement executed by the Defendant and the J10 Third Party was binding and legally enforceable is not of much consequence. What becomes an issue of consequence is whether in the circumstances of this case the remedy of specific performance is available to the Plaintiff. Mr. Shonga, for the Plaintiff, argued, with much force, that there was valuable consideration for the agreement. The Plaintiff advanced the Defendant some IC790,00.00 by way of rent which at the time of executing the sale agreement the Plaintiff and the Defendant agreed would form part of the purchase price of the property. It was Mr. Shonga's submission that this advance rental payments, although it may look like past consideration, amounted to valuable consideration. In the alternative, Mr. Shonga argued and submitted that, if we find that the advance rental payments did not amount to executed consideration then we must find that the advance rental payments amounted to executory consideration which, on the authority of the passages he cited from Chitty on Contract Halsburys Laws of Englane is good consideration. Mr. Shonga observed that promises were made. The Defendant was to sell and the Plaintiff was to buy the property. Mr. Ndhlovu, for the Third Party, argued that the Defendant was entitled to rescind the sale agreement because the Plaintiff signed the sale agreement on 6th September, 1990 on the understanding that he would be given K1.5 Million immediately but the Plaintiff considered the signing of the sale agreement as an assurance that the Defendant would sale the property to him. Further, Mr. Ndhlovu submitted that whereas the Defendant wanted K1.5 Million to enable him purchase a house in Makeni etc, the Plaintiff treated the rentals and advances totaling to 1<790,000 as a set off against the purchase price. J11 Mr. Ndhlovu also attacked the validity of the sales agreements, between the Plaintiff and Defendant on the ground that it did not comply with Section 4 of the Statute of Frauds(6). Mr. Ndhlovu also referred us to Section 27 of the Bill of Exchange Act 1882 on a debt not being valuable consideration. It is common cause that the advance rentals and other advances were paid by the Plaintiff to the Defendant long before the execution of the sale agreement which, the failure to honour by the Defendant, stimulated this action. The critical question which arises is whether on the facts of this case the advance payments were past consideration or valuable consideration. As the learned authors of Chitty on Contracts' and Halsbury's Laws of EnglandM have said, it has long been held that in determining whether consideration is past, the courts are not bound to apply a strictly chronological test. If the giving of the consideration and the making of the promise are substantially the same transaction, the exact order in which these events occur is not decisive: Chitty on Contracts 26th Edition Volume 1 at Paragraph 172M; Halsburys Laws of England 4th Edition Volume 9 Paragraph 32d 2). In this case, as we have already said above, the relationships between the Plaintiff and the Defendant over the property did not start with the execution of the sale agreement under inquiry. There existed, between the Plaintiff and the Defendant, a relationship of Landlord and Tenant. And, so far as we have been able to ascertain from the facts, it is clear to us that the payment of rentals in advance and the agreement between the Plaintiff and the Defendant to sell the property to the Plaintiff were substantially one and the same transaction. It could not be J12 otherwise. The Plaintiff advanced the Defendant money while he was in the Defendant's property. When the Defendant wanted to sell the property, the Plaintiff expressed interest in the property and said the advances he gave to the Defendant be treated as part of the purchase price. Clearly, these transactions cannot, in relation to the sale and purchase of the property, be treated separately. Indeed, even the Plaintiff and the Defendant themselves say in the agreement they executed that the rentals paid in advance would be part of the purchase price. The arguments and submissions by Mr. Ndhlovu that the consideration was passed consideration are, therefore, untenable. We accept Mr. Shonga's submissions that there was valuable consideration, but not for the reasons he gave, but for the reasons we have given. Having found that the payment of rental advances and the execution of the sale agreement were substantially one and the same transaction and that the advance rental payments constituted valuable consideration we find it unnecessary to consider all the other issues raised by Counsel as to the validity or otherwise of the sale agreement between the Plaintiff and the Defendant. We only refer to the submissions by Mr. Ndhlovu that the sale agreement between the Plaintiff and the Defendant did not comply with Section 4 of the Statute of Frauds(6). We do not accept these submissions. We have looked at the sale agreement between the Plaintiff and the Defendant and we find it a sufficient Memorandum to satisfy Section 4 of the Statute of Frauds(6). The parties' names, the property to be sold and bought, the consideration and the signature of the parties are all in the sale agreement: Section 4 of the Statute of Frauds(6) will not require anything more than that. J13 For these reasons we hold that the learned trial Judge misdirected himself when he held that on the facts of this case there was no binding contract between the Plaintiff and the Defendant. We must reverse the learned trial Judge's finding and we do so. The first ground of appeal, therefore, succeeds. The question arises whether, after holding that the sale agreement between the Plaintiff and the Defendant was legally binding, we must order specific performance of the agreement of sale between the Plaintiff and the Defendant. The learned trial Judge refused to order specific performance on the ground that the Third Party obtained good title. Mr. Shonga vehemently attacked this holding in his eloquent and well researched submissions. Mr. Shonga referred us to the cases we have recited above and argued that whatever title the Third Party obtained was subject to the rights of the Plaintiff. Mr. Ndhlovu's reply to all this was that the contract between the Defendant and the Third Party was valid and, therefore, as the learned trial Judge held, the Third Party obtained good title. We have considered these submissions. On the facts of this case and the authorities cited to us we have no hesitation whatever to accept Mr. Shonga's submissions that whatever title the Third Party obtained is subject to the rights of the Plaintiff. The evidence demonstrates to us that from the time the Third Party became interested in purchasing the property he was aware of the presence of the Plaintiff in the Property. The Third Party went to the property and found it locked and being guarded. The Third Party also talked about the lease between the Plaintiff and the Defendant which was to expire end of December 1990. Clearly the Third Party knew about the presence of the Plaintiff in the J14 property and he should, therefore, have investigated to find out what interests, if any, the Plaintiff had in the property. If the Third Party did care to investigate he would have found that the Plaintiff had equitable interest in the property under the agreement of sale between the Plaintiff and the Defendant. In the circumstances we must fault the learned trial Judge's holding that the Third Party had obtained good title to the property, without saying more. In the result, ground three of appeal succeeds. Having held that the Plaintiff had equitable interest in the property, is the Plaintiff, as a consequence, entitled to the remedy of specific performance? Specific performance is not a legal remedy. It is an equitable remedy. (cid:9) When considering whether to order specific performance we have to take into consideration all the circumstances of the case including the conduct of the Plaintiff. On the evidence we note that the Third Party is now and has been in possession for sometime. So we have to consider the justice of dislodging the Third Party from the property at this time. We have also to consider the conduct of the Plaintiff in this transaction. Though not expressly stated, the Plaintiff tried to paint the Defendant as a villain. The Defendant is portrayed as a person who after executing a sale agreement with the Plaintiff went to sell the property to the Third Party at a price higher than that he contracted for with the Plaintiff. However, on the facts of this case that is not the true picture of the Defendant. We hold the view that the Plaintiff forced the Defendant to breach the sale agreement. It is clear from the evidence that the Plaintiff knew very well that the Defendant was in a desperate financial position. The Defendant J15 needed money urgently to pay for the farm house he wanted to buy in Makeni and pay rent for the house he was occupying. But when Defendant asked for K1.5 Million to be paid towards the purchase price of the property so that he could sort out his financial problems, the Plaintiff, though expressing the desire to purchase the property and was at the time in occupation, for no convincing reasons, did not advance the Defendant the K1.5 Million he requested for. The Defendant's reaction was, therefore, to quickly sell the property to the Third Party to get the money he urgently needed. In the event, it is clear to us that the Plaintiffs refusal to advance the Defendant the K1.5 Million he requested for left the Defendant on tenterhooks leading him to take the action that he did. In these circumstances, we are of the firm opinion that an order for the specific performance of the sale agreement between the Plaintiff and the Defendant will not meet the justice of this case. In the result, we uphold the learned trial Judge's refusal to grant an Order of Specific Performance, but not for the reasons he gave but for the reasons we have given. Instead of an order for specific performance we award the Plaintiff damages for breach of contract to be assessed by the Deputy Registrar. The Plaintiff is also entitled to recover any balance of advance payment, if any, still owing to him from the Defendant. Of course the corollary to what we have just said is that we do not interfere with the sale agreement between the Defendant and the Third Party. In the result, ground two of appeal dealing with specific performance fails. In view of our holding that the sale agreement between the Plaintiff and the Defendant was a binding and legally enforceable contract, ground four which relates to mesne profits must, even without considering the submissions and arguments, succeed. Accordingly, we • J16 reverse the learned trial Judge's order that the Plaintiff pays the Third Party mesne profits. There is the issue of improvements made to the property by the Plaintiff. There was no appeal against learned trial Judge's order that the Third Party should be the ultimate beneficiary of the improvements to the property. In the circumstances, we are precluded from dealing with this issue. The Plaintiff has succeeded on three grounds out of four. For this reason the whole appeal succeeds with costs to be taxed in default of agreement. Costs to be paid by the Defendant. D. M. LEWANIKA DEPUTY CHIEF JUSTICE I. C. MAMBILIMA SUPREME COURT JUDGE PETER CHITENGI SUPREME COURT JUDGE